Convicted money launderer and cocaine/gun runner Frank Vennes Jr., a close personal friend and major campaign contributor of Minnesota presidential candidates Michele Bachmann and Tim Pawlenty, has been indicted on federal fraud and money-laundering charges for his alleged role in the $3.5 billion Tom Petters Ponzi scheme.

Vennes became implicated in the Petters Ponzi in 2008. Millions of dollars worth of his assets have been seized and are being liquidated to pay back some of the victims of the multibillion-dollar scam—the largest in Minnesota history. But until now, Vennes had not been charged with a crime for his involvement in the Ponzi scheme, which sent Petters to the U.S. Penitentiary at Leavenworth Federal Prison for 50 years.

If convicted, Vennes could go to federal prison for the second time in his life on such charges—and also be in need of a second presidential pardon.

Besides each taking tens of thousands of dollars in campaign cash from Vennes and his family, Bachmann and Pawlenty—along with former Minnesota Sen. Norm Coleman and former Minnesota GOP Chair Ron Ebensteiner—unsuccessfully sought a presidential pardon from President George W. Bush for Vennes’ federal crimes from the 1980s. Vennes donated heavily to Bachmann’s congressional campaign, Pawlenty’s gubernatorial campaign, Coleman’s senatorial campaign, the state House Republican Campaign Committee, the Minnesota GOP and other GOP candidates, all during the time the four Republicans heartily endorsed his candidacy for a pardon.

The timing of Vennes’ largesse has led many to speculate that it was part of a “pay-for-pardon” plot.

WHO IS FRANK VENNES JR.?

Frank Elroy Vennes Jr. was convicted in 1987 on federal charges of money laundering, cocaine distribution and illegal firearms sales, to which he pleaded guilty and no contest. The charges stemmed from an undercover operation in which Vennes and his co-defendants received $370,000 from federal agents and deposited the money in bank accounts in Switzerland, the Bahamas and the Isle of Man in a series of transactions. In the last transaction, Vennes personally delivered $100,000 to Switzerland, where his associates allegedly either lost or stole it.

Vennes also sued the federal government for more than $10 million, claiming that he was entrapped by federal agents even though he pleaded guilty and no contest to the charges, and that his attorney rendered him “ineffective assistance” in representing him. Among his claims, Vennes charged that the undercover agent for whom he had delivered and then lost $100,000 had revealed himself to be a member of the Chicago underworld and threatened to kill Vennes and his family if he didn’t come up with the lost 100 grand. Those threats prompted Vennes to begin illegally selling firearms and cocaine to federal agents, Vennes alleged.

Vennes’ claims ultimately were rejected in 1994 following a series of appeals.

THE PETTERS PONZI

It didn’t take long after his appeals were rejected for Vennes to fall into bad company again. Starting around 1995, according to the grand jury indictment filed April 20 against vennes and two hedge fund managers, Vennes began a business association with Tom Petters, the now-convicted mastermind behind a massive Ponzi scheme that Petters had hatched just two years earlier.

Court documents state that Vennes raised money from investors directly and also induced hedge funds to raise money from investors to purchase short-term, trade finance promissory notes in Petters’ company, PCI. In return, Vennes allegedly earned more than $105 million in commissions from 1995-2008.

The PCI notes were represented to investors as being used to finance the purchase of electronics goods and other consumer goods from suppliers for resale by PCI to big-box retailers.

“In reality,” the indictment states, “the transactions underlying virtually all PCI notes were fictitious. Documents evidencing the purported transactions were fabricated by Petters’ criminal associates, and the purported suppliers of the electronics goods were shell companies acting in concert with Petters. No retailers participated in the transactions underlying the PCI notes and there were no purchases and resales of consumer electronics or other consumer merchandise. Instead, Petters diverted hundreds of millions of dollars to his own purposes and paid purported profits to investors with money raised from the sale of new notes.

Around 2002, according to the indictment, Vennes introduced Petters to David William Harrold and Bruce Francis Prevost, owners and managers of Palm Beach, FL-based and offshore hedge funds, referred to as the “Palm Beach Funds.” Vennes described himself to Harrold and Prevost as “Petters’ financier” and said that he “knew Petters’ business intimately,” according to the indictment.

Vennes recruited the two to raise money for Petters and PCI and, court documents state, from 2002 through September 2008, the Palm Beach Funds invested approximately $8 billion in PCI notes. The arrangement netted Harrold and Prevost more than $58 million in fees under their agreements with the Palm Beach Funds. Vennes earned more than $60 million in commissions paid by Petters and/or PCI for the Palm Beach Fund investments based on a percentage of the money he attracted.

According to the indictment, Vennes had a similar arrangement with another hedge fund from which he obtained more than $45 million in commissions on money he raised for PCI.

The grand jury indictment also named Harrold and Prevost as defendants and alleges that they, along with Vennes, made false representations to Palm Beach Fund investors about the PCI investments and also failed to notify investors about delayed payments and approaching defaults on the PCI notes.

Instead, beginning in February 2008, the three allegedly engaged in a series of “note swaps” in which they would exchange PCI notes that were on the verge of defaulting with other PCI notes that had later maturity dates. Harrold and Prevost, through Vennes, engaged in over 35 of these “note swap” arrangements involving over 250 PCI notes worth about $1 billion, according to the indictment.

“They created the appearance that the PCI notes had not defaulted, and were intended to conceal (from Palm Beach Fund investors) PCI’s inability too pay,” court documents state.

Later, the indictment charges, “Instead of receiving cash payments and then reinvesting that cash in new PCI notes as they had done in the past, Harrold and Prevost, aided and abetted by Vennes, simply exchanged old PCI notes for new ones in a cashless exchange of paper.”

From February 2008, when the “note swaps” began, through September 2008, when the Petters Ponzi came crashing down, Vennes convinced Harrold and Prevost to raise more than $75 million in new investor money, the indictment states.

Vennes, Harrold and Prevost were charged with four counts of securities fraud on April 20. On April 21, Harrold and Prevost pleaded guilty and indicated they were cooperating with prosecutors in their case against Vennes.

Vennes also was charged with one count of money laundering involving a check he wrote to the law firm of Howse & Thompson, P.A. for $98,814.12. The money was derived from securities fraud, according to the indictment. Craig Howse formerly was Vennes’ personal lawyer.

VENNES AND TEEN CHALLENGE

Howse also was chairman of the Fidelis Foundation, a nonprofit organization “organized to assist Christians in discerning, clarifying and implementing God’s call and direction in their life,” according to the group’s tax filings. Fidelis invested over $27 million in the Petters Ponzi, more than $4 million of it from Minnesota Teen Challenge. Fidelis also donated over $1.4 million to Minnesota Teen Challenge.

In earlier lawsuits, Vennes is alleged to have been used by Petters to lure primarily Christian organizations into investing in Petters’ companies through Metro Gem — one of Vennes’ companies — or through the Fidelis Foundation. Among those investors was Minnesota Teen Challenge, which allegedly lost $5.7 million in investments in Petters companies.

“In true Ponzi scheme fashion,” one lawsuit filed by investors against Petters and his associates alleges, “each time one of Plaintiff’s promissory notes expired, Petters secured a new note via Metro Gem and, again via Metro Gem, paid the interest due on the old note, presumably with funds obtained from other investors.”

The investment connection between the Fidelis Foundation, Petters and Teen Challenge is detailed in a federal affidavit authorizing seizure of Petters’ assets. The affidavit states that Petters implicated Vennes in his alleged fraud scheme in recorded phone conversations.

“In these recordings, Petters repeatedly admits executing the fraud scheme by providing fraudulent information to investors,” the affidavit states. “Petters also attributes knowledge of, and participation in, the fraud scheme to (Deanna) Coleman, (Robert) White, Vennes (investor broker), and (Larry) Reynolds (vice president of NIR). Petters states that Vennes told Petters that they are “a little paper manufacturing plant.” On one occasion, Petters states that he and Vennes would be jointly implicated in a scheme to defraud investors out of $130 million.”

In the recordings, the affidavit states, “Vennes cautions that if investors send auditors out to visit warehouses where the merchandise is located, that the scheme would implode. Vennes also asks that Coleman prepare purchase orders to be submitted to investors so that the investors will extend the due date on a debt.”

The affidavit states that evidence shows Vennes was the broker for five investors who are owed approximately $1.2 billion by Petters and his companies, and that as a broker he earned at least $28 million in commissions for delivering investors to Petters and PCI.

Coleman, White, Reynolds and Michael Catain (another Petters associate) all pleaded guilty to charges in the fraud investigation and all fingered Petters as the kingpin in the massive Ponzi scheme.

Minnesota Teen Challenge was forced to lay off 22 employees because of losses from its investments in Petters’ businesses. The organization only obliquely referred to its endangered investments in an oddly worded letter posted on its website:

“About seven years ago, one of our major donors recommended that we consider building a strong reserve fund for Teen Challenge — a nest egg — for use in case of emergency or for program expansion. The donor suggested that we work with the Harvest Fund, and later the Fidelis Foundation, organizations that work with many other Christian ministries, and consider investing some of his large charitable gifts in the Petters Companies, a once strong, respected corporate entity in Minnesota.”

The letter goes on to note that “For seven years this investment bore a healthy return and helped us expand our programming and outreach.” But it made no mention of the precarious situation those investments were in, nor did it name the mysterious “major donor” who recommended the investment in Petters’ company.

PAWLENTY AND VENNES

While Vennes raked in tens of millions from his association with Petters, he continued to press for his pardon. By 2001, he also began donating to political candidates and parties in earnest, including Tim Pawlenty, Michele Bachmann, Norm Coleman, Mark Kennedy, Amy Klobuchar, the Minnesota House Republican Campaign Committee and the Republican Party of Minnesota.

Vennes and his family donated a total of $10,000 to Pawlenty’s gubernatorial campaign in 2002.

In late 2002 just weeks after he was elected, Pawlenty, along with Coleman and former Minnesota GOP State Chair Ron Ebensteiner, sought a presidential pardon for Vennes in a December 20 letter Coleman sent to “President George W. Bush c/o Mr. Karl Rove.”

Coleman wrote that he was “well acquainted with Frank” and went on to describe him as “a very successful businessman, known for his integrity and fine character ... His efforts and contributions have had a significant influence for the good of Minnesota. Frank is indeed an example of successful rehabilitation.”

Coleman went on to write that he wanted to join “my friend, (former Minnesota GOP Chairman) Ron Eibensteiner and Governor-Elect Tim Pawlenty in urging President Bush to grant Frank Vennes a Presidential Pardon.”

The roles of Pawlenty and Eibensteiner in seeking a pardon for Vennes are unclear; Freedom of Information Act requests did not turn up pardon letters from either. Pawlenty has refused to respond to repeated requests for explanations of his relationship with Frank Vennes or his role in Vennes’ pardon request.

Vennes, his family, and his personal lawyer continued to donate heavily to Pawlenty. Kimberly Vennes (Frank's wife), Gregory Vennes, Stephanie Vennes (Gregory's wife), and Colby and Denley Vennes, who have shared an address with Frank and Kimberly, each donated $2,000 to the Pawlenty for Governor Committee in 2002. Frank, Kimberly, Gregory, Stephanie, Colby and Denley Vennes each contributed $250 to Pawlenty in 2004 and $2,000 apiece in 2006.

Vennes’ lawyer, Craig Howse, and his wife, Lisa, contributed a total of $5,600 to Pawlenty’s gubernatorial campaigns from 2002-2006.

Howse—partner in the law firm through which Vennes allegedly laundered ill-gotten Petters Ponzi money—continues to be associated with Pawlenty. Shortly before leaving office last year, Pawlenty circumvented the Commission on Judicial Selection and appointed Plymouth lawyer Jamie L. Anderson to the 4th Judicial District Court. Anderson was a lawyer in Howse’s firm and also the wife of Pawlenty’s chief of staff, Paul Anderson.

Bachmann’s political relationship with Vennes began in December 2005, when Vennes and his wife, Kimberly, along with his brother and his brother’s wife, Greg and Stephanie Vennes, made their first donations to Bachmann’s congressional campaign–$4,200 apiece. It’s not clear when her personal relationship with Vennes began. However, Bachmann told WCCO’s Esme Murphy in an Oct. 19 interview that she met Vennes through Minnesota Teen Challenge.

“Frank Vennes is an individual here in the Twin Cities who had a remarkable record of rehabilitation in his own life,” Bachmann told Murphy. “He was a person who put a lot of money in the community, Teen Challenge, for instance, which I believe very strongly in. It does a wonderful job taking people who are alcohol- or drug-addicted and trying to get them clean and sober.

“And I knew Frank Vennes through Teen Challenge and saw that he had made a remarkable transformation in his life, and he told me his goal was to give as much money as he could to charity so that more people could find freedom in their life. And I thought that was great, so I supported him.”

All this time, Frank Vennes Jr. and his family kept supporting Bachmann with campaign cash. Following the Vennes brothers’ and their spouses’ $4,200 contributions to Bachmann in 2005, Frank — who has never lived in Bachmann’s congressional district — dumped another $10,000 into her campaign coffers in 2006. Vennes’ personal lawyer and his wife, Craig and Lisa Howse, donated $9,200 to Bachmann from 2006-08.

“As a U.S. Representative, I am confident of Mr. Vennes’ successful rehabilitation and that a pardon will be good for the neediest of society,” Bachmann wrote to the U.S. Office of Pardon Attorney. “Mr. Vennes is seeking a pardon so that he may be further used to help others. As I know from personal experience, Mr. Vennes has used his business position and success to fund hundreds of nonprofit organizations dedicated to helping the neediest in our society.”

In addition, Bachmann noted that Vennes needed a pardon because he “still encounters the barriers of his past and especially in the area of finance loan documents.” Bachmann has refused to further explain the nature of her “personal experience” with Vennes or provide clarification of the finance loan documents to which she refers in her letter.

On June 30, 2008 — six months after Bachmann wrote her pardon recommendation for Vennes — he and his wife gave another $9,200 to Bachmann’s campaign.

Then, on Sept. 24, 2008, federal agents raided Vennes’ $5 million Shorewood home on Lake Minnetonka in connection with the Petters investigation and seized “boxes and buckets of silver and gold coins, trays of jewelry, five stacks of $100 bills, boxes of gem stones, silver plates and Rolex watches,” along with diamond rings and artwork. His $6 million oceanfront home in Jupiter, Fla., was raided also and among the items seized was a briefcase containing “256 $20 gold pieces dated 1904, and eight uncirculated one-half dollar pieces.”

“I had known Mr. Vennes for some time and was familiar with his good works with local charity organizations,” Bachmann wrote to the Office of Pardon Attorney. “Like so many others, I was under the impression that he had turned his life around and was seeking to do the right thing by those less fortunate. Regrettably, it now appears that I may have too hastily accepted his claims of redemption and I must withdraw my previous letter.”

Bachmann’s motives in withdrawing her recommendation of a pardon for Vennes without ever having been indicted — other than to distance herself from a convicted felon and heavy campaign contributor in an election year — are unclear. She has never responded to my inquiries about her relationship with Vennes, or why she sought a presidential pardon for a convicted money launder who wasn’t even a constituent.

However, she told WCCO’s Murphy that “when the Tom Petters affair came open and Frank may have had a part in that affair, it wasn’t appropriate for me to recommend a pardon anymore. And so my office issued a letter, and we pulled that pardon back, because we don’t know what the answers are right now about his involvement with Tom Petters.”

Just days later, on Oct. 6, the assets and records of Vennes, Petters, Petters’ companies and other Petters associates were frozen by a federal judge. Most of Vennes’ assets are being liquidated to repay some of the victims of his alleged fraud under a court-ordered “work-out plan” just issued in January. According to that plan, two separate groups of creditors would split $29 million and Vennes would be left with only his personal effects, an automobile, one year’s living expenses of $62,400, and some money to cover legal expenses.

However, it wasn’t until April 20, 2011—more than two-and-a-half years later—that Vennes was formally charged with any crime in the case.

On Oct. 3, the day after Bachmann withdrew her pardon recommendation, she tried to symbolically wash her hands of Vennes’ most recent campaign contributions by donating the sum of $9,200—an amount equal to Frank and Kimberly Vennes’ donations to Bachmann earlier that year—to Minnesota Teen Challenge. That didn’t work out so well for the congresswoman either. Minnesota Teen Challenge returned the donation to Bachmann two weeks later.

“We didn’t want to be involved if it was dirty money,” said Rich Scherber, executive director of Minnesota Teen Challenge. Scherber personally suffered a loss of $423,759 in the Petters Ponzi after investing with Vennes, according to court documents.

Scherber says that when Bachmann’s office made the donation, they explained the connection between the campaign’s charitable contribution to them and Vennes’ campaign contributions to Bachmann. Scherber’s staff brought the matter to the organization’s chairman, and he brought it before the board.

“The board had decided they weren’t going to take the check,” Scherber continues. “They sat on it for two weeks and we just returned the check.”

Bachmann ultimately donated the $9,200 to R3, a collaborative of Christian recovery groups that includes Minnesota Teen Challenge.

QUESTIONS REMAIN

Many questions remain unanswered about the apparently close relationship Frank Vennes Jr. once had—and may still have—with three of Minnesota’s most visible Republican politicians. Two of them—Bachmann and Pawlenty—want to be president. And Coleman just landed a job with one of Washington, DC’s top lobbying law firms.

Bachmann, Pawlenty and Coleman have been contacted multiple times in the past to respond to questions about Frank Vennes Jr. All were contacted with written questions for this story as well. Bachmann, Pawlenty, Coleman or their spokespersons have never responded.

Was there a “pay-for-pardon” scheme at work? At this time, there’s no evidence to prove that. Vennes clearly was trying to curry financial favor with the same politicians who would later write pardon recommendations on his behalf.

It’s also not known whether Vennes solicited Bachmann, Pawlenty and Coleman to write pardon endorsements on his behalf or whether they volunteered the services of their office. All have been asked and none have responded.

Then there is the matter of what to do with Vennes’ campaign contributions, which, like his other assets, almost certainly could be linked to illegal Petters Ponzi money. Bachmann only gave away $9,200 of the $27,600 she took from Vennes and his wife. Pawlenty spent his $23,500 in Vennes family contributions on his campaigns and never claimed to give any of it away. The donations to other politicians and party units goes well into six figures.

When Petters was indicted, most politicians couldn’t dump their contributions from him fast enough. Will they do the same for Vennes, whose contributions allegedly came from the same poisoned well, now that he’s been indicted?

George W. Bush left office without ever pardoning Vennes. So the question remains: Would a President Pawlenty or President Bachmann pardon their close personal friend Frank Elroy Vennes Jr.?

52 comments:

We were acquainted with Frank and Kim after he got out of jail the first time. What seemed really strange, even back then, was that Frank was donating big bucks to religion with no source of income. He didn't have a job, at all. He did not work. Kim was a secretary but Frank did nothing. Didn't add up and it did not seem like a "conversion" from his former lifestyle, even back then.

Karl,Thanks for your work. Have you ever looked more closely into the AoG church and their finances? We attended an AoG church a couple of years ago. It was interesting to find out that since the new pastor came in 2001 he has taken out 4 mortgages on the property even though we never had a building project! (We did have a remodel, but nearly .5 million funds were raised for it and the building permit was for only 267K). It was a small church that only had 600,000 in debt and now has 1.8 million! Just a small place in Farmington MN. Just wondering what became of the $. I heard a rumor through some church people that the MN state AoG encouraged their churches to invest in this sceme. Of course it is all hush hush now. Have you ever looked at this angle? Do you know of an organization called Church Extension Plan that gave the church these 5 mortgages? I believe it is just a financing group for AoG churches. They ask for investments from church members and claim to use their money to loan to churches to build and expand. But our church did neither and still got 5 mortgages. Do all AoG pastors rake the equity out of their building's property like this? Do you know how many churches lost money in the Vennes deal? Now I don't completely think the pastors were victims - some may be more like scemers themselves using congregation's money in hopes of becoming successful in a get rich quick sceme. PS. No one in the church knew of the mortgages until there was a leak last year. If you would like detailed info please leave email - I would love someone to look into this.

For loans, we usually apply in banks but it seems more hassling to me when its all about church loans. To it's better to contact firms who provide loans on this criteria and have quick and easy procedures..

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Ripple in Stillwater

Ripple in Stillwater is the sole creation of Stillwater, Minnesota, writer Karl Bremer. It covers whatever captures the author's muse at the moment. You can reach Ripple in Stillwater at saintcroix-at-aol-dot-com, or you can follow me on Twitter @kdbremer. If you're wondering about the name of this blog, go here.

Minnesota Society of Professional Journalists 2011 Page One Award Winner

Ripple in Stillwater author Karl Bremer won Second Place in the Minnesota Society of Professional Journalists 2011 Page One Awards for "Best Use of Public Records."

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